Fiat Chrysler CEO wants lower wage scale for all new U.S. hires

Eric Beech

3 Min Read

WASHINGTON (Reuters) - Fiat Chrysler Automobiles FIA.MI wants to eliminate the two-tier wage system that pays new U.S. automotive workers a lower rate than veterans by gradually phasing out the higher scale as older workers leave the company, Chief Executive Sergio Marchionne said on Wednesday.

Fiat Chrysler CEO Sergio Marchionne talks to the media during the FCA Investors Day at the Chrysler World Headquarters in Auburn Hills, Michigan May 6, 2014. REUTERS/Rebecca Cook

The automaker’s Chrysler unit and U.S. rivals General Motors Co (GM.N) and Ford Motor Co (F.N) are scheduled to negotiate their next labor deals with the United Auto Workers union next year, but Marchionne said at a conference in Washington that he wants to open talks this year.

UAW officials have said they hate the two-tier wage system and want to eliminate it over time. Norwood Jewell, nominated to serve as a vice president when the union meets in June to ratify its new leaders, said last December the current system was a “financial unfortunate” caused by industry weakness in 2007, but that the stronger economy now should help the union’s case in the next round of talks.

Pay of hourly workers at the entry level starts at just under $16 an hour and rises over time to more than $19. Veteran workers are paid just more than $28 an hour. The American automakers have said they need the entry-level wage scale to compete on labor costs with Japanese, South Korean and German automakers that have U.S. plants.

A UAW spokeswoman could not be reached to comment.

Marchionne, who called the two-tier wage system his “biggest problem,” credited the UAW with increased flexibility over the last several years. However, he said he hoped the U.S. union would not argue that the shift should be to the higher level of pay for all workers.

“The way you do this is you grandfather the Tier 1s,” Marchionne said of the veteran workers. “You make them a dying class and you build a Tier 2 structure that sets the wage mechanism for the next generation.

“When you have a bumper year, you pay them as much as a Tier 1 would make if not more,” he added of the lower-tier wage scale. “But if I’m in the toilet because the markets are down or GM is successful, or Ford, and then we go down in earnings, then I think at the end of the day you share the pain with the company.”

Marchionne referred to Dennis Williams, who is the choice to be the UAW’s next leader, and said he wants to “start the discussions right now, a year before the contract is up.”